Blue Diamond garden centres beats market to increase profits as new build location announced

Blue Diamond plans and seeks new builds, with East Bridgford in Nottinghamshire the first, as it continues to add £10m a year to sales.

Alan Roper
Alan Roper

Given the scarcity of suitable opportunities on the market, managing director Alan Roper has been seeking greenfield sites in suitable locations to build new garden centres.

Bridgford Garden Centre is an example of this and the 140,000 square foot centre, Blue Diamond's 20th, will open in March 2018 following a £4.5m fit-out that starts in November 2017. Blue Diamond has taken out a 35 year lease on the site, which also has the potential to produce a turnover of £10m per annum and will employ 150 people. Roper said Bridgford is in a great location, with excellent AB demographics and transport links. The Group has a further three new build sites in the pipeline.

The site is to be redeveloped alongside the existing Bridgford Garden Centre by owner Edward Tarbatt and leased to Blue Diamond. The 18 acre centre site will include a children's play barn, concessions buildings, a vets and 600 parking spaces. The existing centre will close when the Blue Diamond centre opens.

Pleydell Smithyman has worked on the bespoke design. Roper said the design matches that at Fermoy's in Devon. Natta Construction is building the centre. Gilbert Evans advised Tarbatt on the deal. Blue Diamond bought three garden centres from the Tarbatts in 2008.

It was against this background of significant opportunities to grow the business that the Company undertook a rights issue in late 2016/2017, which raised £3.7m and will enable the Group to finance its development programme and to take advantage of any acquisitions that come on to the market. Shares were offered first to existing shareholders and then to new investors, with 36 new shareholders joining the register. The Company continues to look for new investors in the Channel Islands.

Chairman Simon Burke said in an introduction to new accounts: "Our good start in 2016 carried through for the whole year, and so I am able to report another very strong set of figures, coupled with progress in implementing our strategy of expansion and development.

"In terms of the business performance, we grew sales, increased gross and net margin rates, improved stock turn and significantly reduced debt relative to EBITDA. The result was a 26% increase in pre-tax profit (before disposal proceeds from the sale of David Dumosch Ltd) to £8.3m and the lowest year-end gearing ratio in over nine years, at 27%.

"Sales increased by 10% to £91m, and by 8% on a like-for-like basis. Growth was achieved across most of our estate, but we were particularly pleased to see strong figures from Trentham and more recently Derby, which were refurbished during the year and are already providing a return on the investment. Overall, our pre-tax return on capital now stands at 13%, up from 12% last year.

"We acquired two centres during the year, on the M11 at Harlow, and at Coton in Cambridge. Strong cash generation during the year enabled these acquisitions to be financed from existing resources. Both centres are located within good catchment areas and have the potential for development. Harlow is one of four centres for which we now have well-developed plans for substantial expansion and/or redevelopment. These plans form the backbone of our investment strategy over the next two to three years and we are well advanced with the planning process in most cases.

"In addition to discussing the possible acquisition of existing garden centres we are pursuing opportunities to build wholly new centres in areas that match our customer criteria. The first of these should be signed shortly and work on site is scheduled to begin towards the end of 2017.

"The new trading year has started strongly, helped by very benign spring weather. The main trading season has only just begun, however, so it is early days. We have not yet seen any significant impact on customer demand from the Brexit process or the resumption of retail price inflation. We are watching these factors closely and I believe we are well placed to manage any impact."

Roper added: "I believe that Blue Diamond’s consistent growth has come because we are successful in exploiting the opportunities of an increasingly broader non-gardening offer that the modern garden centre now conveys, whilst continuing to remain credible and authoritative in our core gardening offer. This is in contrast to the concession-led and relatively undifferentiated offer that is prevalent in most of the sector. Recent upheavals elsewhere in the industry are testament to the challenges of keeping pace with a changing market."

Roper said customer average spend increased 4.3%: "This is noteworthy as the industry’s average spend as defined by the Garden Centre Association was down 0.2%."

He said he hopes to reach £100m sales by year end.

Return on capital employed increased by 1% to 13% in 2016: "A notable example would be a centre that was losing money on a £6m turnover when we bought it; now, four years later, it is generating profits before tax in excess of £1m per annum."

He added: "We have three potential new build projects in the pipeline, which if successful in achieving planning permission are expected together to generate £26m in sales after a number of years' trading. Our 20th centre is a new build project due to open in spring 2018."

"We recently gained planning permission to expand our Newbridge centre and expect to receive planning permission for a further two of our sites this year. Our refurbishment programme continues following Trentham and Derby last year, with St Peters' refurbishment completing in April of this year. Coton Orchard, our recent acquisition in Cambridge, is the next project, which starts in July 2017."

"Restaurant turnover at £15.5m has always been a substantive part of the business but like-for-like sales growth slowed to 6% in 2016. Many of our restaurants have and are reaching maturity."

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